The role of independence in the Green-Lin Diamond-Dybvig model

Green and Lin study a version of the Diamond-Dybvig model with a finite number of agents, independent determination of each agent’s type (impatient or patient), and sequential service. For special preferences, they show that the ex ante first-best allocation is the unique equilibrium outcome of the model with private information about types. For general preferences, we show, via a simple argument, that the truth-telling equilibrium of any mechanism is the only equilibrium. Hence, the absence of a bank-run equilibrium is more general than shown by Green and Lin. JEL classification: D82, G21